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The Canada Revenue Agency says the Rick Hansen Foundation improperly issued a $1.8-million tax receipt to Rick Hansen for donating rights to his name to the foundation, The Vancouver Sun has learned.

In an Oct. 12 letter to the foundation, CRA’s charities directorate says it has “concluded that (Hansen’s donation) does not meet the definition of a gift.”

“As it is our view that this receipt has been issued improperly, it is our expectation that the foundation should cancel this receipt … within 60 days from the date of this letter,” the letter states.

Although CRA says it has reached a conclusion on the matter, it does not appear to be a final ruling. The agency says in its letter that it is willing to hear further submissions on the matter.

Several lawyers who specialize in intellectual property rights and charity law told The Sun that, while it is common for famous people to license their name for commercial purposes, they were not aware of other instances where a famous person donated his name to a charity.

The foundation says it believes the transaction — which was based on an independent estimate of the fair market value of Hansen’s name — complies with CRA guidelines.

“We are in discussions with all parties to seek remedies that are satisfactory to CRA. If this is ultimately determined to not be ‘tax receiptable,’ the foundation will comply,” the foundation stated in an email Tuesday.

In B.C., tax receipts for charitable donations can be used to claim tax credits equal to 43.7 per cent of the donation amount.

These tax credits can then be used to reduce taxes that would otherwise be payable for the next five years.

On this basis, the $1.8-million tax receipt issued to Hansen — who earns at least $350,000 per year from the foundation, according to reports filed with CRA — could potentially have saved him $786,600.

It is not clear whether Hansen has utilized this receipt, but if he has and the receipt is subsequently cancelled, he would potentially be liable for significant back taxes, interest and possibly penalties. The donation was made and the receipt was issued in 2009, but neither Hansen nor the foundation publicly disclosed the transaction.

The foundation’s roots date back to 1988, when Hansen completed his around-the-world Man in Motion Tour.

At that juncture, he created the Man in Motion World Tour Society. Its purpose was to administer income derived from the Rick Hansen Man in Motion Legacy Fund.

In 1989, the society obtained registered charity status, and in 1992 it changed its name to the Rick Hansen Man in Motion Foundation. In 2009, the foundation once again changed its name, this time to the Rick Hansen Foundation.

Since it was established, the foundation has raised $252 million for spinal cord research, accessibility projects and quality of life initiatives.

The foundation’s longtime co-chairmen are Hansen and Lyall Knott, a senior partner at the Vancouver law firm Clark Wilson LLP.

In its email to The Sun, the foundation explained that, before Hansen officially donated his name, the foundation was using his name without any formal agreement.

“As its program and donations became bigger and more sophisticated, the board – with independent professional advice – decided that this matter needed to be formalized in order to secure these rights.”

The donation was duly reported in the foundation’s full audited financial statements, but those statements have never been publicly released.

Instead of full audited statements, the foundation issues summarized statements only. According to auditor PricewaterhouseCoopers, those summarized statements “do not provide all the disclosures required by Canadian generally accepted accounting principles” and are therefore “not a substitute” for the full audited statements.

When The Sun asked for full audited statements, the foundation refused on grounds that the information it had already released was sufficient. It also cited the need to maintain donor confidentiality.

Charities are not legally required to disclose their full audited financial statements, but it is highly unusual for a large and high-profile charity like the Rick Hansen Foundation not to do so.

The Sun surveyed seven other major charities in B.C. and determined that all provide, as a matter of routine, full audited statements.

On Friday, after The Sun protested the foundation’s refusal to provide access to full audited statements, the foundation said it had changed its policy and would post the statements on its website by today [Wednesday].

Meanwhile, The Sun obtained copies for the past five years from an alternate source.

Those statements show that, during the 2008-09 fiscal year, Hansen donated “the right to use and associate the name of Rick Hansen with the foundation.”

The naming rights were deemed to have a fair market value of $1.8 million, as determined by an independent valuation. The foundation said the valuation included a range of values, but the board took the lowest one and KPMG confirmed the “reasonableness” of that figure.

On that basis, the foundation issued a $1.8-million tax receipt to Hansen.

The foundation’s latest financial statements (for the year ending March 31) warned that CRA “may review” the receipt issued to Hansen.

CRA subsequently completed its review of Hansen’s donation of naming rights and determined that it did not qualify as a gift.

In its Oct. 12 letter, CRA directed the foundation to cancel the receipt, and amend the financial return it had earlier filed with the charities directorate, within 60 days.

CRA does not specifically say why the donation does not qualify as a gift. Famous people routinely sell their names for commercial purposes. It is, however, unusual for a famous person to donate their name to a charity.

“While in some cases a person can donate intellectual property rights, I am not aware of any other instances in which a Canadian charity has issued an official donation receipt for the ‘donation’ or licensing of the living person’s name,” Toronto lawyer Mark Blumberg, an expert in charity law, said in an email Tuesday.

The Sun has also learned that, as of June this year, CRA was challenging a $10-million tax receipt that the foundation issued in 2006 to geologist Stewart Blusson for a donation of private company shares.

Blusson co-discovered the Ekati diamond mine in the Northwest Territories in the mid-1990s. Australian mining giant BHP eventually acquired 80 per cent of Ekati, but Blusson owns 10 per cent of the mine and continues to receive royalties from it.

Last year, Canadian Business magazine ranked him the 95th richest Canadian, with an estimated net worth of $640 million.

He has made several blockbuster donations, including a $50-million donation to UBC in 1998, and a $30-million donation to the fledgling Quest University in Squamish in 2006.

According to the foundation’s latest statements, Blusson’s donation was made in the form of shares of a private company, controlled by Blusson and “holds the rights to a percentage of natural resource revenues in Canada.”

Because the shares of private companies are not liquid, Blusson and the foundation entered into an agreement that would permit Blusson to buy back the shares over a 10-year period at predetermined prices. In May 2010, Blusson repurchased the remaining shares, thereby concluding the deal.

CRA reviewed the foundation’s issuance of a tax receipt for that donation, which potentially reduced Blusson’s tax bill by $4.37 million, and gave it a preliminary thumbs down.

“The foundation has been informed that the Canada Revenue Agency has challenged the tax receipt that was issued to the donor,” the foundation reported in its latest financial statements, which were signed off by the auditor in June.

The foundation told The Sun that its last correspondence with CRA on this matter was at the end of 2010. “Management has assessed the likelihood of repayment as remote, and as such, no amounts have been accrued for in the audited financial statements,” it said in its email.

Neither Hansen nor Knott returned messages Tuesday. Blusson could not be reached for comment.

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Rick Hansen 'donated' rights to his name to his foundation, received $1.8-million tax receipt

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